April 23, 2021

What We Learned from Amazon, Walmart, and Target

7
Minute Read

COVID-19 had an unparalleled impact on retail. Yet big box stores like Amazon, Walmart, and Target responded quickly and effectively - and are winning. Here's what brands can learn from their examples.

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eCommerce

It goes without saying that COVID-19 had an unparalleled impact on retail. Consequently, it’s important to explore exactly how the pandemic shifted both customer expectations and customer behaviors.

Some interesting findings include:

  • Curbside fulfillment options grew significantly. Prior to the pandemic, just 6% of the retailers in the 2020 Digital Commerce 360 Top 1000 offered curbside. Now, 50% do.
  • As of February 2021,68.% of those Top 1000 also offered buy online pick up in store (BOPIS).
  • Walmart and Target reported record sales in Q2 of 2020, with Target seeing their largest percentage increase in the company’s history, and Walmart doubling their eCommerce sales.
  • In May 2020, Amazon’s eCommerce sales doubled, allowing them to now corner 38% of the eCommerce market (Walmart, their biggest competitor, accounts for 6%).
  • Retailers with online shopping options saw rapid growth during COVID, going from 37% market penetration to over 80% at the peek of the pandemic. While things have come down, many shoppers remain committed to their new digital habits, with online penetration remaining at a steady 48%. 

This data paints a clear picture: while some retailers are still struggling to adapt and recover, others pivoted early on and have experienced significant growth in revenue thanks to their innovative responses to COVID-19. 

Most of us can’t compete with retail giants like Amazon, Walmart, and Target. Yet their pandemic adjustments make useful case studies from which other brands can learn and take strategic cues.

Strategies for Success

While each big box retailer had some unique approaches, there are clear overarching themes in their strategies.

These retailers:

  • Recognized that customer loyalty was upended by the pandemic, with customers purchasing wherever they could, whenever products were available, rather than relying on their go-to retailers
  • Quickly offered a variety of fulfillment options, from Curbside to BOPIS to same-day or next-day (or faster) delivery 
  • Pivoted retail locations to become fulfillment centers, or reduced floor displays to make more warehouse room to fulfill orders
  • Devoted additional resources to enhancing their digital or omnichannel experiences, like updates to mobile apps so that customers could check in for Curbside, or increased AI-driven product recommendations to guide customers to make additional purchases

Let’s break down each of these strategies to see how big box stores are responding to the pandemic and winning.

Lack of Customer Loyalty

At a time when many retailers were struggling, some retail executives anticipated a grace period where customers would be more tolerant as brands tried to adjust to the pandemic’s impacts. Unfortunately, customers did not rise to the occasion.

Small businesses and restaurants seemed to be mostly insulated from these customer frustrations, but eCommerce retailers, mass merchandisers, department stores, and big box retailers found that customers were 35% less loyal after experiencing a problem.

In fact, as Mark Cohen, director of retail studies at Columbia Business School shared, “Today's customer is in charge. They are no longer handcuffed to the mall near their home. They can browse anywhere and buy anywhere. They are calling the shots, and they will not relinquish that.”

Interestingly, customer tolerance varied by problem. Most were understanding of product shortages, but if a website or app was difficult to navigate, customers simply went elsewhere. And the number one source of customer frustration? Having to pay to ship a return. 

Big box retailers like Amazon, Walmart, and Target recognized this and responded. Amazon began not even requiring customers to return some items, and simply issued refunds, instructing customers to keep the item.

Target heavily promoted free shipping and free returns, as well as offering enhanced free shipping and return options to RedCard (their store credit card) holders. Walmart also offered free shipping and free returns, as well as scheduled pickups from home.

And though customers were still inclined to go buy toilet paper wherever they could find it, regardless of brand, big box stores saw their customer base grow and many experienced incredible retention. Amazon Prime members, for example, maintain a 90% retention rate after just one year.

By offering customers what they wanted - easy checkout processes, free and simple returns, quick order fulfillment, and straightforward digital experiences - big box retailers reached new sales heights while simultaneously satisfying customers.

Expanded Fulfillment Options

Amazon, Walmart, and Target were already industry leaders in fulfillment options, offering BOPIS and curbside, but the onset of COVID-19 caused them to expand even further.

Walmart launched “Express Delivery,” a 2-hour or less delivery program. They charged $10 on top of existing delivery fees for the express option, or offered a Delivery Unlimited program, which includes unlimited home deliveries for a $98 annual fee or a monthly $12.95 fee. Delivery Unlimited members paid $10 for each express delivery, rather than their delivery fees and the express charge. 

Target offered “Drive Up” exclusively in their app, encouraging customers to download it. With the app, shoppers could order in the app, drive up, and a Target team member would deliver their items directly to the customer’s car. They also pushed their same day delivery service, offering new subscribers four weeks free to trial the service, or the option to pay a one-time delivery fee.

Amazon, which experienced massive influxes of orders, particularly in March, April, and May of 2020, were initially caught off guard. They struggled to hit their 2-day delivery window for Prime customers, and paused shipping of non-essential items until mid-April, as they made significant adjustments to their supply chain, team member safety protocols, and brought in more than 175,000 new warehouse and delivery workers between March and mid-April. 

Retailers also adjusted their store layouts. Walmart and Target built stations, even if just temporary, to house their BOPIS and curbside orders. Some store locations minimized displays and shrunk their floor space to expand their warehouses. Walmart hired thousands of Personal Shoppers who focused on fulfilling BOPIS and curbside orders quickly and accurately. 

All of these adjustments enabled these retailers to put items in customers’ hands quickly, and cement their success during the pandemic.

Enhanced Digital & Omnichannel Experiences

While free shipping and returns and seamless yet varied fulfillment were keys to big box retail success throughout the pandemic, none of it would have mattered if they offered lackluster omnichannel experiences.

Customers Expect Omnichannel Experiences


In fact, the pandemic prompted more customers to shop around than ever before, with 88% of shoppers saying they researched online before making a purchase either online or in-store. Another 85% of customers say they trust online consumer reviews more than they trust brand-supplied information, making positive and frequent reviews critical for brands. 

For big box retailers, COVID-19 merely accelerated these trends. They already had strong online shopping and checkout processes, with Amazon’s 1-Click experience the gold standard. 

As Wall Street Journal reporters Sarah Nassauer and Jennifer Maloney wrote, “Before the pandemic, Walmart, Target, and many large retailers had already spent heavily to build eCommerce warehouses, mobile apps, and delivery networks….”

So when COVID struck, these retailers were already ahead of the curve. They simply had to expand some options - like Target adding Drive Up to their app - in order to meet new customer demands. 

The lesson to learn here? It pays to be prepared. Digital transformation was already underway, and big box retailers saw the signs and invested, leaving them poised to capitalize on the past year’s extreme eCommerce demands.

Key Takeaways & The Future of Retail

While Amazon, Walmart, and Target responded to the pandemic in a myriad of winning ways, they didn’t come out unscathed.

Amazon and Walmart in particular faced public backlash from their massive profit increases yet little-to-no wage enhancements for essential employees who were risking their health to fulfill orders. Many small business owners and consumers were frustrated that big box retailers were deemed essential and able to sell things like clothes in their stores, while local boutiques were closed. 

Now, 40% of consumers say they’ll shop at brands that align with their values, prioritizing social responsibility and quality over convenience and cost-savings. McKinsey reports that while big box stores drove growth in consumer goods at the beginning of the pandemic, smaller brands have had more success in late 2020 and early 2021.

For retailers that aren’t one of the Big 3, this is encouraging news. Retailers can compete by focusing on enhancing their digital experiences, because while the massive influx of eCommerce sales in Spring 2020 has evened out, it hasn’t returned to pre-pandemic numbers. 

Smart brands will also invest in making order fulfillment fast and easy. 

Aside from customer experience enhancements, companies should also focus on brand differentiators. It’s these differentiators that drive brand loyalty in today’s incredibly competitive environment. Loyalty programs are one way to do this. Over 70% of customers are willing to recommend a brand if it has a good loyalty program, and nearly 60% of Internet users believe earning rewards or loyalty points is one of the most valuable shopping experience options.

Another strategy is to truly live out your brand’s values. Brands that are viewed as making the world a better place outperform the stock market by 134%, and 75% of customers expect brands to make more of a contribution to their well-being and quality of life. 

This emphasis on well-being extends to quality of customer service. Consumers consistently rank customer service as one of the most important factors in ensuring their loyalty, with 69% identifying it as “very important.” According to Business Wire, satisfied customers will share their experience with an average of 11 different people, helping brands with critical word-of-mouth marketing. 

It’s more essential than ever that brands intentionally focus on customers - knowing them, understanding them, constantly innovating to provide them a more personalized and meaningful experience, and soliciting their feedback as appropriate. By making these adjustments, companies position themselves to differentiate and compete for increasingly elusive brand loyalty.

About the Author

Sarah Falcon

,

VP Marketing

Sarah is a nimble and creative marketing leader with 15 years of experience in a mix of agencies, B2B, and B2C enterprises. She brings a background in building and driving impactful marketing practices and processes for growing businesses. Sarah has expertise in brand, content marketing, lead generation, and marketing operations. She’s a co-author of the 2019 book on B2B eCommerce Digital Branch Secrets: eCommerce Playbook for Distributors.

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